As filed with the Securities and Exchange Commission on July 16, 1999
Registration No. 333-
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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THE PANDA PROJECT, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0323354
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
951 Broken Sound Parkway
Boca Raton, Florida 33487
(561) 994-2300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Melissa F. Crane
Acting Chief Financial Officer
The Panda Project, Inc.
951 Broken Sound Parkway
Boca Raton, Florida 33487
(561) 994-2300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act, check the following box. [x]
If the registrant elects to deliver its latest annual report to
securityholders, or a complete and legal facsimile thereof, pursuant
to item 11(a)(1) of this Form, check the following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box. [ ]
CALCULATION OF REGISTRATION FEE
=====================================================================
Title of Proposed Proposed
Each Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share (1) Price (1) Fee (1)
- ---------------------------------------------------------------------
Common Stock,
par value 2,100,000
$.01 per share shares $0.148 $311,640 $86.64
=====================================================================
(1) Estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) under the Securities Act of 1933
based on the average of the high and low bid prices reported on the
OTC Electronic Bulletin Board on July 15, 1999.
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PROSPECTUS File No. 333-
2,100,000 Shares
THE PANDA PROJECT, INC.
Common Stock
---------------------
This prospectus will offer 2,100,000 shares of common stock of
The Panda Project, Inc., proposed to be sold from time to time by
Joseph A. Sarubbi pursuant to a settlement agreement. Panda does not
expect to receive any of the proceeds from the sale of the common
stock by the Selling Securityholder.
The Selling Securityholder may offer his Panda Project common
stock through public or private transactions at prevailing market
prices. Panda Project common stock is listed on the OTC Electronic
Bulletin Board with the ticker symbol: "PNDA." On July 12, 1999, the
closing price of one share of Panda Project common stock on the OTC
Electronic Bulletin Board was $0.156.
The common stock offered under this prospectus represents
approximately 7.2% of the total number of shares of Common Stock
outstanding on July 12, 1999. The sale of this common stock could
have a negative impact on the market price of the Common Stock and
adversely affect the ability of Panda to raise capital through the
sale of its equity securities.
The common stock offered under this prospectus has not been
registered under the blue sky or securities laws of any jurisdiction.
Any broker or dealer should assure the existence of an exemption from
registration or ensure such registration in connection with the offer
and sale of the common stock.
Panda will pay all the expenses in connection with this offering,
other than selling expenses and counsel fees and expenses incurred by
the Selling Securityholder, if applicable. These expenses are
estimated to be $14,000.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OUR SECURITIES OR
DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS
ILLEGAL FOR ANYONE TO TELL YOU OTHERWISE.
-----------------------
The date of this prospectus is July , 1999.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information
Incorporation of Documents by Reference
Recent Developments
Risk Factors
Year 2000 Compliance
Use of Proceeds
Settlement
Selling Securityholder
Plan of Distribution
Description of Capital Stock
Experts
Unless the context indicates otherwise, the term "Company" and
references to "we," "our" and "Panda Project" in this prospectus refer
to The Panda Project, Inc.
WHERE YOU CAN FIND MORE INFORMATION
Panda is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. In accordance with this
Act, Panda files reports and other information with the Securities and
Exchange Commission (the "Commission"). The Common Stock of Panda is
traded on the OTC Electronic Bulletin Board.
You may obtain copies of the information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, at prescribed rates. Further
information on the operation of the Commission's Public Reference Room
in Washington, D.C. can be obtained by calling the Commission at
800-SEC-0330.
The Commission also maintains an Internet world wide web site
that contains reports, proxy statements and other information about
issuers, like Panda, who file electronically with the Commission. The
address of that site is http://www.sec.gov.
This prospectus does not contain all of the information set forth
in the Registration Statement and its exhibits and schedules. Certain
items are omitted in accordance with the rules and regulations of the
Commission.
You may read and copy this information at the following location
of the Commission:
Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
You should rely on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized
anyone else to provide you with different information. We are not
making an offer of the shares of Common Stock in any state where the
offer is not permitted. You should not assume that the information in
this prospectus or any supplement is accurate as of any date other
than the date on the front of those documents.
Panda maintains a World Wide Web site at www.pandaproject.com.
Information contained in Panda's World Wide Web site will not be
deemed to be part of this prospectus.
THIS PROSPECTUS IS ACCOMPANIED BY A COPY OF PANDA'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, WHICH FORM 10-K WAS
SUBSEQUENTLY AMENDED, AND PANDA'S MOST RECENT QUARTERLY REPORT ON FORM
10-Q FOR THE QUARTER ENDED MARCH 31, 1999.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THESE STATEMENTS RELATE TO OUR FUTURE PLANS,
OBJECTIVES, EXPECTATIONS AND INTENTIONS. THESE STATEMENTS MAY BE
IDENTIFIED BY THE USE OF WORDS SUCH AS "EXPECTS," "ANTICIPATES,"
"INTENDS," "PLANS" AND SIMILAR EXPRESSIONS. OUR ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE DISCUSSED IN THESE STATEMENTS.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Commission allows Panda to "incorporate by reference"
information in this prospectus, which means that Panda can disclose
important information to you by referring you to another document
filed separately with the Commission. The information incorporated by
reference is deemed to be part of this prospectus, except for any
information superseded by information in this prospectus. This
prospectus incorporates by reference the documents listed below that
Panda has previously filed with the Commission. These documents
contain important information about Panda and its finances.
Company Filings Period or Date Filed
- --------------- --------------------
Annual Report on Form 10-K, as amended For the year ended
December 31, 1998
Quarterly Report on Form 10-Q, as amended Quarter ended March 31,
1999
Definitive Proxy Statement on Schedule 14A Filed with the
Commission on April 20,
1998
Current Reports on Form 8-K Filed May 18, 1999 and
June 18, 1999
Registration Statement on Form 8-A Filed May 5, 1994,
registering the Common
Stock under Section
12(g) of the Exchange
Act
Panda also incorporates by reference additional documents that it
may file with the Commission. These documents include periodic
reports, like Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K, proxy statements and other filings.
Later information filed with the Commission under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 updates and
supersedes this prospectus.
Panda will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request of such person,
a copy of any or all of the documents incorporated by reference into
this prospectus (without exhibits to such documents other than
exhibits specifically incorporated by reference into such documents).
You can obtain documents incorporated by reference in this
Registration Statement by requesting them in writing or by telephone
from Panda at the following address:
The Panda Project, Inc.
951 Broken Sound Parkway
Boca Raton, Florida 33487
Attention: Chief Financial Officer
(561) 994-2300
RECENT DEVELOPMENTS
On December 11, 1998, Panda and Joseph A. Sarubbi ("Sarubbi")
entered into a settlement agreement (the "Settlement Agreement")
relating to litigation in which Sarubbi has obtained a judgment
against Panda in the amount of $1,227,041. Under the Settlement
Agreement, Panda has agreed to pay Sarubbi total consideration worth
$1,000,000 of which $240,000 has been paid in cash in December 1998
and the remainder is to be satisfied upon the sale of shares of
Panda's common stock which have been delivered to Sarubbi by Panda.
Panda has registered 1,775,000 shares for Sarubbi pursuant to the S-2
Registration Statement, declared effective on February 5, 1999. The
parties have agreed to petition the Florida Court of Appeals for the
Fourth District to dismiss the litigation within five business days
after Panda's obligations in the Settlement Agreement have been
completed. If such obligations are not completed, the judgment will
remain in effect. This settlement amount was recorded as a charge
against Company earnings for the quarter ended December 31, 1998.
Panda has outstanding loans from Helix (PEI) Inc. ("Helix") in
the aggregate principal amount of $2,000,000. Such loans bear
interest at an annual rate equal to the prime rate of interest payable
by the Royal Bank of Canada plus 2%, are secured by Panda's
intellectual property and were due and payable on February 15, 1999.
As of May 15, 1999, this principal amount due Helix has not been
repaid and is in default. The inability of Panda to repay the Helix
loans when due may have a material adverse effect on Panda, including
possible loss of rights to its intellectual property through
foreclosure which would cause Panda to cease its operations. In
connection with the Helix loans, Panda has issued to Helix warrants to
purchase an aggregate of 2,850,000 shares of Common Stock at exercise
prices ranging from $1.63 to $2.125 per share (collectively, the
"Helix Warrants"). The Helix Warrants have expiration dates ranging
from December 19, 1999 to August 7, 2000. These warrants have been
valued at an aggregate of approximately $4,324,000. A total of
$4,324,000 has been charged to amortization expense for these warrants
through February 15, 1999. This accounting treatment has no impact on
Panda's cash balance. As of April 30, 1999, Helix and its affiliates
hold approximately 5.7% of Panda's outstanding Common Stock (not
including shares issuable upon exercise of warrants).
On May 14, 1999, Panda, Helix and Silicon Bandwidth, Inc. ("SBI")
entered into an agreement whereas upon the closing of the acquisition
of certain assets of Panda by SBI, SBI will pay $1,000,000 to Helix.
In consideration of such payment, and the issuance of 1,000,000 shares
of Panda common stock to Helix, Helix releases Panda from payment on
all accrued interest on the notes remaining unpaid as of the date of
such payment of $1,000,000. The remaining $1,000,000 and accrued
interest will be paid in eleven payments by SBI to Helix.
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE
OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO INVEST
IN SHARES OF OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY
OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE
MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE TRADING PRICE OF
OUR COMMON STOCK TO DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR
INVESTMENT.
1. RISK ASSOCIATED WITH OUR FINANCIAL POSITION.
(a) WE HAVE A HISTORY OF LOSSES AND EXPECTATION OF FUTURE
LOSSES. We are a development stage company with limited operating
revenue. We have incurred losses in each year since our inception in
1992. As of July 6, 1999, we had an accumulated deficit of
approximately $74 million. We expect to continue to experience
substantial losses for the foreseeable future. We are unable to
predict the extent of any future losses or the time required to
achieve profitability.
(b) WE LACK SOURCES OF ADDITIONAL FUNDING. We require
substantial working capital to fund our business. We have had
significant operating losses and negative cash flow from operations
since inception and expect to continue to do so for the foreseeable
future. We have depended upon proceeds of sales of our securities to
fund our operations since our inception. Panda has been unable to
secure additional sources of capital to fund our business. This
continued inability to secure capital will cause us to be unable to
(i) develop or enhance our products, (ii) take advantage of future
opportunities or (iii) respond to competitive pressures without
additional funding. These limitations placed on Panda due to our
inability to secure additional funding could materially adversely
affect Panda's business, financial condition and operating results.
In addition, Panda s working capital is insufficient to operate
Panda. Panda is currently in default under different leases due to
breaches of insolvency covenants. In the event that the proposed sale
of Panda s assets to SBI is not consummated and Panda cannot obtain
additional financing, Panda may be forced to cease operations.
(c) WE CANNOT REPAY OUTSTANDING INDEBTEDNESS: Panda has
outstanding loans from Helix in the aggregate principal amount of
$2,000,000. The loans bear interest at an annual rate equal to the
prime rate of interest payable by the Royal Bank of Canada plus 2%,
are secured by Panda's intellectual property and were due and payable
on February 15, 1999. As of July 9, 1999, this principal amount due
Helix has not been repaid and we are in default under the provisions
of this loan. The inability of Panda to repay the Helix loans when
due may have a material adverse effect on Panda, including possible
loss of rights to its intellectual property through foreclosure, and
could cause Panda to be unable to implement its business strategy or
force Panda to otherwise significantly curtail or cease its
operations. Our obligations under the Helix loans would be assumed by
SBI upon consummation of the Proposed Sale.
2. BUSINESS FACTORS THAT MAY ADVERSELY AFFECT OUR OPERATIONS.
(a) WE FACE THE PRESSURES OF A COMPETITIVE INDUSTRY. Panda
operates in markets that are subject to intense competitive pressures
that could affect prices or demand for Panda's products and services.
The effect of competition on prices and demand may result in reduced
profit margins and/or loss of market opportunity. Some competitors of
Panda dominate their industries and have the financial resources to
enable them to withstand substantial price competition or downturns in
the market for semiconductor packages, related technologies and/or
computers. Panda faces the possibility (1) that we will not be able
to compete successfully, (2) that our competitors or future
competitors will develop technologies or products that render Panda's
products and technology obsolete or less marketable or (3) that we
will not be able to successfully enhance our products or technology or
adapt them satisfactorily.
(b) WE HAVE RISKS INVOLVED WITH OUR INTERNATIONAL SALES.
Conducting business outside of the United States is subject to
particular risks, including:
- changes in regulatory requirements and tariffs;
- reduced protection of intellectual property rights;
- difficulties in distribution;
- the burden of complying with a variety of foreign laws;
and
- political or economic constraints on international trade
or instability.
In addition, all of our international sales are currently priced
in U.S. dollars, but future sales or licensing of our products or
technologies outside the United States may be subject to the risks
associated with fluctuations in currency exchange rates.
(c) WE CANNOT BE SURE THE MARKET WILL ACCEPT OUR PRODUCT.
The products and technologies currently being sold or developed by
Panda utilize newly developed designs. We believe that our existing
and proposed technology and products represent significant
advancements in semiconductor packaging technology. Demand for
Panda's existing and proposed products, however, is subject to a high
degree of uncertainty. Such high degrees of uncertainty are typical
in the case of newly developed products. Achieving marketing
acceptance for Panda's technology and existing and proposed products
will require substantial marketing efforts and expenditure of
significant funds to educate potential purchasers as to the
distinctive characteristics and anticipated benefits of Panda's
proposed products and technologies. Potential purchasers may be
inhibited from doing business with Panda due to their commitment to
their existing products. In addition, many potential purchasers may
be reluctant to use Panda's products and technologies until a
sufficient number of other potential purchasers have already committed
to do so. We have hired sales and marketing personnel for its VSPA
semiconductor package and Compass Connector. Panda's marketing
efforts may not be successful. If we are unable to market our
products successfully, our business, financial condition and operating
results will be materially adversely affected.
(d) OUR PRODUCT IS VERY COMPLEX. Panda's success will depend
in part upon its products and technology meeting acceptable cost and
performance criteria, and upon timely introduction of our products and
technology into the marketplace. There can be no assurance (1) that
Panda's products and technology will satisfactorily perform the
functions for which they are designed, (2) that they will meet
applicable price or performance objectives or (3) that unanticipated
technical or other problems will not occur which would result in
increased costs or material delays in their development or
commercialization. In addition, technology as complex as that which
will be incorporated into Panda's proposed products may contain errors
which become apparent subsequent to widespread commercial use.
Remedying such errors could delay Panda's plans and cause us to incur
additional costs which would have a material adverse effect on Panda.
(e) WE ARE DEPENDENT ON MANUFACTURERS AND SUPPLIERS. Panda
has developed the ability to manufacture the VSPA semiconductor
package. We have also made arrangements with third-party
manufacturers to produce certain versions of the VSPA semiconductor
package. Despite these existing production arrangements, Panda may
not be able to produce sufficient quantities of VSPA to meet demand.
Any inability to meet the demand for our products would have a
material adverse effect on Panda's business, financial conditions and
operating results.
(f) WE DEPEND ON KEY PERSONNEL. Because of the specialized
technical nature of our business, we are highly dependent upon
qualified scientific, technical and managerial personnel. The
competition for qualified personnel in the technology field is
intense. We may not be able to attract and retain the qualified
personnel necessary for the development of our business. The loss of
the services of existing personnel, as well as the failure to recruit
additional key scientific, technical and managerial personnel in a
timely manner, would be detrimental to our research and development
programs and to our business. Panda may not be able to continue to
hire additional qualified personnel or retain such necessary
personnel. The failure to attract and retain the necessary personnel
could materially adversely affect our business, financial condition
and operating results. We maintain "key man" life insurance on Mr.
Crane's life in the amount of $2,000,000.
(g) WE ARE DEPENDENT ON OUR INTELLECTUAL PROPERTY.
Trademarks, patents, copyrights, trade secrets and other intellectual
property are critical to our success, and we rely on trademark, trade
secret protection and confidentiality and/or license agreements with
our employees, clients, partners and others to protect our proprietary
rights. We seek to protect our proprietary position by, among other
methods, filing United States and foreign patent applications related
to our proprietary technology, inventions and improvements that are
important to the development of our business. Proprietary rights
relating to our technologies will be protected from unauthorized use
by third parties only to the extent that they are covered by valid and
enforceable patents or copyrights or are effectively maintained as
trade secrets. As of June 7, 1999, Panda had obtained 19 United
States patents and an aggregate of 43 foreign patents. We currently
have a total of 17 patent applications pending in the United States
and 30 foreign patent applications. Pending patent applications may
not result in patents being issued. In addition, the laws of some
foreign countries do not protect our intellectual property rights to
the same extent as do the laws of the United States. The patent
position of high technology companies involves complex legal and
factual questions and, therefore, we cannot predict their validity and
enforceability with certainty. Even if issued, our patent
applications may be challenged, invalidated, held unenforceable or
circumvented. Further, rights granted under future patents may not
provide proprietary protection or competitive advantages to us against
competitors with similar technology. Others may independently develop
similar technologies or duplicate technologies developed by us.
Effective trademark and trade secret protection may not be available
in every country in which our products and services are made available
online. The steps we have taken to protect our proprietary rights may
not be adequate, and third parties may infringe upon or misappropriate
our trade secrets, trademarks, trade dress and similar proprietary
rights. Others may independently develop substantially equivalent
intellectual property. Any significant failure to protect our
intellectual property in a meaningful manner could materially
adversely affect our business, financial condition and operating
results. In addition, litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets
or to determine the validity and scope of the proprietary rights of
others. Such litigation could result in substantial costs and
diversion of management and technical resources, which could
materially adversely affect our business, financial condition and
operating results.
3. OTHER FACTORS THAT MAY ADVERSELY AFFECT OUR RESULTS
(a) WE HAVE TWO PENDING LITIGATION MATTERS. On October 16,
1998, a complaint was filed against Panda in the United States
District Court for the Southern District of New York by Promethean
Investment Group, L.L.C. The complaint alleges breach of contract by
Panda for failing to proceed with a financing transaction and seeks
damages in an unspecified amount in excess of $270,000 or a
declaration that Panda is required to proceed with the financing
transaction. The outcome is both immeasurable and undeterminable. We
may not be successful in defending this litigation. Even if Panda is
successful in defending itself in such litigation, the diversion of
critical resources involved in defending and settling these actions
could have a substantial material adverse effect on Panda.
On December 11, 1998, Panda and Joseph A. Sarubbi ("Sarubbi")
entered into a settlement agreement (the "Settlement Agreement")
relating to litigation in which Sarubbi has obtained a judgment
against Panda in the amount of $1,227,041. Under the Settlement
Agreement, Panda has agreed to pay Sarubbi total consideration worth
$1,000,000 of which $240,000 has been paid in cash and the remainder
is to be satisfied upon the sale of Panda Project shares which have
been delivered to Sarubbi by Panda. Panda will register those shares
for Sarubbi pursuant to the Registration Statement of which this
prospectus is a part. The parties have agreed to petition the Florida
Court of Appeals for the Fourth District to dismiss the litigation
within five business days after Panda's obligations in the Settlement
Agreement have been completed. If such obligations are not completed,
the judgment will remain in effect. This settlement amount will be
recorded as a charge against Company earnings for the quarter ended
December 31, 1998.
(b) WE CANNOT ENSURE YEAR 2000 COMPLIANCE. Panda believes
that computer systems of Panda and its suppliers are able to process
date information beyond the year 1999. Panda is working to monitor
the progress of its key suppliers to achieve Year 2000 compliance.
The failure of a major supplier to become Year 2000 compliant would
materially adversely affect Panda's business operations.
4. OTHER FACTORS THAT MAY ADVERSELY AFFECT OUR COMMON STOCK
(a) WE HAVE BEEN DELISTED FROM NASDAQ NATIONAL MARKET. Panda
was delisted from the Nasdaq National Market, effective December 16,
1998, due to its inability to meet the requirements necessary to be
listed on that exchange. On December 17, 1998, Panda began trading on
the NASD OTC Electronic Bulletin Board system or in what is commonly
referred to as the "pink sheets." As a result, an investor may find it
more difficult to dispose of Panda's securities or to obtain accurate
quotations as to the price of, such securities. In addition,
delisting may affect our ability to issue additional securities or to
secure additional financing.
(b) WE HAVE EXISTING OBLIGATIONS TO SOME PANDA
SECURITYHOLDERS. Holders of Common Stock received in the August 1998
private placement have the right to receive $100,000 in penalty
payments from Panda due to unfulfilled obligations. Some of the
holders have agreed to waive this penalty.
(c) ANTI-TAKEOVER STATUTES. Certain provisions of our
Amended and Restated Articles of Incorporation and Florida law could
make a merger, tender offer or proxy context involving Panda more
difficult, even if such events could be beneficial to the interests of
the shareholders. Such provisions could limit the price that certain
investors might be willing to pay in the future for shares of the
common stock. See "DESCRIPTION OF CAPITAL STOCK Florida Law and
Certain Anti-takeover Charter Provisions."
(d) POSSIBLE LACK OF RESOURCES OF SELLING SECURITYHOLDER.
The Selling Securityholder may be deemed to be an Underwriter pursuant
to the Securities Act. As Underwriters, they may become liable to the
purchasers of the Common Stock offered under this prospectus pursuant
to the terms of the Securities Act if certain provisions of the
Securities Act are not complied with by them. The Selling
Securityholder may not have the financial resources to discharge any
such liability.
YEAR 2000 COMPLIANCE
Like many other companies, Year 2000 computer issues create
certain risks for us. If our financial, operational and information
systems do not correctly recognize the process date information beyond
the year 1999, it could have a significant adverse impact on Panda's
ability to process information, which could create significant
potential liability for Panda. To address potential Year 2000 issues
with its internal systems, we have evaluated these systems. The
initial assessment indicated that certain internal systems should be
upgraded or replaced as part of a solution to the Year 2000 problem.
The costs incurred to date related to these programs have not been
material. The estimated cost to be incurred by us in the future is
not expected to exceed $20,000. These estimates do not include
potential costs related to any customer or other claims or the cost of
internal software and hardware replaced in the normal course of
business. These estimates are based on our current assessment of the
projects and may change as the project progresses.
We are also working with key suppliers of products and services
to monitor their progress toward Year 2000 compliance. The failure of
a major supplier to become Year 2000 Compliant on a timely basis could
materially adversely affect our business, financial condition and
operating results.
We have begun internal discussions concerning contingency,
planning to address potential problem areas with internal systems and
with suppliers and other third parties. We expect assessment,
remediation and contingency planning activities to continue throughout
the year 1999 with the goal of resolving all material internal and
external systems and third-party issues. While Panda has not
completed its detail plans with regards to this uncertainty, our
management believes, based on discussions with vendors of its major
business applications and Year 2000 Compliance certificates received
from the related software developers, that the financial impact of
making the required systems changes, if any, will not be material to
Panda's financial position, results of operations or cash flows.
We deem "Year 2000 Compliant" to mean software that can
individually, and in combination with all other systems, products or
processes with which the software is designed to interface, continue
to operate successfully (both in functionality and performance in all
material respects) over the transition into the twenty-first century
when used in accordance with the documentation relating to such
software. Year 2000 Compliance includes being able to, before, on and
after January 1, 2000, substantially conform to the following:
- use logic pertaining to dates which allow users to
identify and/or use the century portion of any date fields
without special processing;
- respond to all date elements and ate input to resolve any
ambiguity as to century in a disclosed, defined and pre-
determined manner; and
- provide date information in ways which are unambiguous as
to century.
This may be achieved by permitting or requiring the century to be
specified or where the date element is represented without a century,
the correct century in unambiguous for all manipulations involving
that element.
USE OF PROCEEDS
Panda does not expect to receive any proceeds from the sale of
shares of Common Stock by the Selling Securityholder.
SETTLEMENT
Under the Settlement Agreement, Panda has agreed to pay Sarubbi
total consideration of $1,000,000 of which $240,000 has been paid in
cash and the remaining $760,000 (the "Outstanding Obligation") was to
be satisfied upon the sale of shares of Common Stock delivered to
Sarubbi by Panda.
Panda has previously issued 1,775,000 shares of its Common Stock
to Sarubbi pursuant to the Settlement Agreement. Sarubbi received
proceeds of $254,450 from the sale of such shares. Panda has issued
an additional 2,100,000 shares of Common Stock to Mr. Sarubbi to meet
its obligations pursuant to the Settlement Agreement. The shares of
Common Stock issued to Sarubbi are restricted securities within the
meaning of the Securities Act and cannot be offered for sale without
an effective registration statement covering such offer and sale or
pursuant to an applicable exemption from the registration requirements
of the Securities Act. Pursuant to the terms of the Settlement
Agreement, Panda filed the Registration Statement (of which this
prospectus is a part) and will use its best efforts to keep the
Registration Statement effective until all of the Common Stock is
disposed or by Sarubbi. Expenses of this offering, estimated at
$14,000, will be paid by Panda.
All trades will be made through a registered broker. All sums
received by Sarubbi as a result of his sale of Common Stock, reduced
by any transaction cost such as broker's fees and commissions incurred
by Sarubbi in the course of such sales, will reduce the aggregate
amount of the Outstanding Obligation on a dollar-for-dollar basis.
Upon satisfaction of the Outstanding Obligation, any remaining shares
of Common Stock held by Sarubbi will be returned to Panda. If the
Outstanding Obligation has not been satisfied upon sale of the Common
Stock, Panda will repay the Outstanding Obligation within 10 days.
SELLING SECURITYHOLDER
All of the shares of Common Stock of Panda offered hereby are
being sold by the Selling Securityholder named below. Panda will
receive none of the proceeds from the sale of shares offered hereby.
The Selling Securityholder is a former director of Panda.
The following table sets forth information concerning the
beneficial ownership of shares of Common Stock by the Selling
Securityholder as of July 6, 1999, and the number of such shares
included for sale in this prospectus, assuming the sale of all Shares
being offered by this prospectus. The shares offered hereby consist
of 2,100,000 shares of Common Stock acquired by Sarubbi pursuant to a
settlement agreement.
Shares Shares Shares
Selling Owned Prior Offered Owned
Securityholder to Offering Hereby After Offering
- -------------- ----------- ------- --------------
Joseph A. Sarubbi 2,100,000 2,100,000 0
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Securityholder
for its own account. Panda will not receive any proceeds form the
sale of the Common Stock pursuant to this prospectus. Panda has
agreed to pay the expenses of registration of the Common Stock,
including Panda's legal and accounting fees and counsel fees and
expenses incurred by the Selling Securityholder.
The Selling Securityholder may offer and sell the Common Stock
from time to time in transactions on the OTC Electronic Bulletin Board
or in brokerage transactions at prevailing market prices. Sales may
be made to or through brokers or dealers who may receive compensation
in the form of discounts, concessions or commissions from the Selling
Securityholder or the purchasers of Common Stock for whom such brokers
or dealers may act as agent or to whom they may sell as principal, or
both. As of the date of this prospectus, Panda is not aware of any
agreement, arrangement or understanding between any broker or dealer
and the Selling Securityholder.
The Selling Securityholder and any brokers or dealers acting in
connection with the sale of the Common Stock hereunder may be deemed
to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit
realized by them on the resale of Common Stock as principals may be
deemed underwriting compensation under the Securities Act.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Panda consists of 50,000,000
shares of Common Stock, $.01 par value, and 2,000,000 shares of
Preferred Stock, $.01 par value ("Preferred Stock").
COMMON STOCK
As of July 12, 1999, there were 29,323,476 shares of Common Stock
outstanding and held of record by 285 shareholders.
The holders of Common Stock are entitled to one vote for each
share held. Holders of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds
legally available therefor. In the event of a liquidation,
dissolution or winding up of Panda, holders of Common Stock are
entitled to receive all assets of Panda available for distribution to
shareholders, subject to any preferential rights of any then
outstanding Preferred Stock. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any
other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion
of this offering, will be fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 2,000,000
shares of Preferred Stock in one or more series and to fix the voting
powers, designations, preferences and relative participating, optional
or other special rights, and qualifications, limitations or
restrictions thereof, including without limitation, dividend rights,
and conversion rights, without any further vote or action by
shareholders. The issuance of Preferred Stock could adversely effect
the voting power of holders of Common Stock and the likelihood that
such holders will receive dividend payments and payments upon
liquidation and could have the effect of delaying, deterring or
preventing a change in control of Panda.
SERIES A CONVERTIBLE PREFERRED STOCK
The Board of Directors of Panda has designated 1,000 shares of
the Preferred Stock as Series A-3 Convertible Preferred Stock ("Series
A Preferred") with the rights, preferences, privileges and terms set
forth in Panda's Sixth Articles of Amendment of Amended and Restated
Articles of Incorporation ("Articles of Amendment"). Panda has issued
600 shares of Series A Preferred for an aggregate purchase price of
$6,000,000. In the event particular conditions are met, Panda has the
right to cause the issuance of 400 additional shares of Series A
Preferred.
Holders of Series A Preferred are entitled to receive a dividend
of 5% per annum of the purchase price of such shares, payable
quarterly, at the option of Panda either in cash or as an accrual to
the purchase price utilized in computing the number of shares of
Series A Preferred issuable on conversion. So long as any Series A
Preferred is outstanding, no dividends may be paid nor shall any
distribution be made, on Common Stock or other shares junior in rank
to the Series A Preferred ("Junior Shares") unless all dividends for
all past quarterly dividend periods have been paid or declared and a
sum of cash or amount of shares sufficient for the payment thereof set
apart.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of Panda, the holders of Series A Preferred
are entitled to receive in cash from the assets of Panda, before any
amount shall be paid to holders of Junior Shares, an amount per share
of Series A Preferred equal to the sum of (i) the purchase price for
such share and (ii) any accrued but unpaid dividends thereon. If the
amounts available for distribution are insufficient to pay the full
amount due to holders of Series A Preferred, and shares of other
classes or series of preferred stock of Panda that are of equal rank
to the Series A Preferred then each holder of Series A Preferred and
such other shares shall receive a percentage of the amounts available
for distribution ratably in proportion to the respective amounts of
such assets to which they otherwise would be entitled.
Holders of Series A Preferred shall have no voting rights except
as required by law or as specified in the Articles of Amendment.
Pursuant to the Articles of Amendment, the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series A
Preferred is required for (i) any amendment to Panda's Articles of
Incorporation which would alter the rights and preferences of the
Series A Preferred or otherwise impair the rights of the holders of
Series A Preferred relative to the holders of the Common Stock or the
holders of any other class of capital stock, or (ii) any issuance of
more than the 1,000 shares of Series A Preferred. In addition,
without the prior written approval of the holders of 66 2/3% of the
Series A Preferred shares, Panda shall not (1) consolidate or merge
with another corporation or other entity or person, whereby the
shareholders of Panda own in the aggregate less than 50% of the
ultimate parent or surviving entity, (2) transfer all or substantially
all of Panda's assets to another corporation or other entity or
person, or (3) fix a record date for the declaration of a distribution
or dividend, whether payable in cash, securities or assets (other than
shares of common stock).
Shares of Series A Preferred are convertible into shares of
Common Stock pursuant to a formula whereby the purchase price of the
shares to be converted plus accrued dividends are divided by a
conversion price defined as the lower of (i) $3.50, subject to
adjustment in the event of certain dilutive issuances of securities by
Panda or for stock splits or similar events (the "Fixed Conversion
Price"), or (ii) a percentage of the average closing bid price of the
Common Stock for the five days immediately preceding conversion equal
to 92%, if conversion occurs during the period beginning 120 days and
ending 180 days after issuance of the Series A Preferred, or 90%, if
conversion occurs after 180 days from issuance of the Series A
Preferred. The conversion of Series A Preferred into shares of Common
Stock may not occur during the period prior to 120 days after issuance
except at the Fixed Conversion Price. All outstanding Series A
Preferred will automatically convert into Common Stock, at the then
applicable conversion price, on the fifth anniversary of issuance. In
addition, Panda has the right to require that all unconverted shares
of Series A Preferred be converted to Common Stock at any time if the
closing bid price of the Common Stock is equal to $12.00 per share for
a period of twenty consecutive trading days.
The terms of the Series A Preferred, provide that upon the
occurrence of certain "Triggering Events," including suspension of
sales under the Registration Statement, failure of Panda's Common
Stock to be listed, or the suspension of trading in Panda's Common
Stock, on the OTC Electronic Bulletin Board, or failure of Panda to
convert shares of Series A Preferred as required, Panda shall pay the
holders $100,000 on the first day of each month until the Triggering
Events have been remedied. Certain Triggering Events have occurred
and have not been remedied as of the date hereof. Panda has entered
into an agreement with the holders of the Series A Preferred whereby
such holders have agreed to waive all amounts owed due to the
occurrence of previous Triggering Events.
PRIVATE PLACEMENT
On August 14, 1998, Panda completed an agreement for the sale of
2,346,626 shares of its Common Stock and 2,346,626 shares of Common
Stock issuable upon the exercise of Common Stock Purchase Warrants in
a private placement to accredited investors with gross proceeds of
approximately $3.8 million of which all but $200,000 has been funded
as of the date hereof (the "Private Placement"). Expenses of the
Private Placement were approximately $230,000. In addition to the
shares of Common Stock purchased by each investor in the Private
Placement, such investor received a warrant (the "Private Placement
Warrants") to purchase an equal number of shares of Common Stock,
subject to adjustment for stock splits and similar events, at an
exercise price of $2.55 per share. Upon exercise of the Private
Placement Warrants, an investor may elect to receive a reduced number
of shares of Common Stock in lieu of tendering the warrant exercise
price in cash. The Private Placement Warrants have a term of five
years expiring August 13, 2003. Issuance of shares of Common Stock
pursuant to exercise of the Private Placement Warrants requires the
approval of Panda's shareholders.
Under the terms of the Securities Purchase Agreement relating to
the Private Placement, if on either the six-month or the one-year
anniversary of the date of closing of the Private Placement (each an
"Anniversary Date"), the average closing bid price of the Common Stock
for the twenty-trading day period ending on the trading day
immediately prior to the applicable Anniversary Date is less than the
closing price ($2.0375) or the prior Anniversary Price in the event
the six-month Anniversary Price is less than the closing price,
respectively, Panda is required to issue a number of shares of Common
Stock within ten days after the Anniversary Date, equal to the product
of (i) (x) the difference between the closing price (or if the
measurement date is the one-year Anniversary Date, the six-month
Anniversary Price if the six-month Anniversary Price is less than the
closing price) and the applicable Anniversary Price, multiplied by
.85, multiplied by (y) the number of shares of Common Stock purchased
by the investors in the Private Placement and not sold or assigned to
non-affiliated third parties, divided by (ii)(x) the applicable
Anniversary Price multiplied by (y) .85. The shares issuable pursuant
to this formula are referred to in this Registration Statement as the
"Fill-Up Shares." Issuance of the Fill-up Shares pursuant to these
provisions requires the approval of Panda's shareholders.
Panda has agreed to seek the necessary shareholder approval prior
to issuance of shares of Fill-Up Shares and common stock issuable upon
exercise of the Private Placement Warrants. As of July 9, 1999, no
Fill-Up Shares have been issued. If Fill-Up Shares had been issued,
the number of Fill-Up Shares which Panda would have been required to
issue on July 9, 1999 totaled 13,622,762.
In the event (i) the Common Stock is delisted or suspended from
trading on Nasdaq, (ii) the Fill-Up Shares and shares issuable upon
exercise of the Private Placement Warrants are not issuable or are not
listed with Nasdaq, or (iii) if Panda fails to issue Fill-Up Shares as
required, then Panda shall pay to the initial investors $100,000 for
each full 30-day period that the condition continues. Because the
Common Stock has been delisted from trading on Nasdaq, liabilities
under the Fill-Up Share provisions have been triggered. A portion of
this liability has been waived in an agreement by and between Panda
and the holders of the Series A Preferred whereby such holders have
agreed to waive all amounts due for failure to issue the Fill-Up
Shares.
Panda has agreed to file a registration statement with the
Commission to effect the registration for resale of the Common Stock
issued in the Private Placement and the and pursuant to the Fill-Up
provisions. If the registration statement is not declared effective
by the Commission within 90 days after the closing of the Private
Placement, Panda may be liable to investors for penalty payments for
each month that such registration statement has not been declared
effective. As of July 9, 1999, the registration statement relating to
these shares of Common Stock has not been declared effective and Panda
could be subject to such penalty payments. Panda shall pay to the
holders of the common stock an amount ranging from 1% to 3% of the
purchase price paid for the common shares issued multiplied by: (i)
the number of months (prorated for partial months) after the end of
such 90-day period and prior to the date the Registration Statement is
declared effective by the Commission exclusive of certain delays which
are attributable to the holders, (ii) exclusive of Allowed Delays (as
defined), the number of months (prorated for partial months) that
sales cannot be made pursuant to the Registration Statement after the
Registration Statement has been declared effective and (iii) exclusive
of Allowed Delays the number of months (prorated for partial months)
that the Common Stock is not listed or included for quotation on the
Nasdaq, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective.
FLORIDA LAW AND CERTAIN ANTI-TAKEOVER CHARTER PROVISIONS
Florida has enacted legislation that may deter or frustrate
takeovers of Panda. The Florida Control Share Act generally provides
that shares acquired in excess of certain specified thresholds,
starting at 20%, will not possess any voting rights unless such voting
rights are approved by a majority vote of a corporation's
shareholders. The Florida Affiliated Transactions Act generally
requires supermajority approval by disinterested directors or
shareholders of certain specified transactions between a corporation
and holders of more than 10% of the outstanding voting shares of the
corporation or their affiliates.
Panda's Amended and Restated Articles of Incorporation provide
that the authorized number of directors may be changed only by
resolution of the Board of Directors, that the Board of Directors is
classified into three classes, only one of which shall be elected at
any given annual meeting and that directors can only be removed for
cause. These provisions, which require the vote of at least two-
thirds of the shareholders to amend, could have the effect delaying,
deterring or preventing a change in control of Panda or depress any
market price of the Common Stock or discouraging hostile bids in which
shareholders of Panda could receive a premium for their shares of
Common Stock.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company has been appointed as the
transfer agent and the registrar for Panda's Common Stock.
EXPERTS
The financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K/A of The Panda Project,
Inc. for the year ended December 31, 1998 have been so incorporated in
reliance on the report (which contains an explanatory paragraph
relating to The Panda Project, Inc.'s ability to continue as a going
concern as described in Note B of the financial statements) of Grant
Thornton LLP for the year ended December 31, 1998. Such financial
statements are incorporated herein by reference in reliance upon such
reports given upon the authority of the firm as an expert in
accounting and auditing.
The financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K/A of The Panda Project,
Inc. for the year ended December 31, 1998 have been so incorporated in
reliance on the report (which contains an explanatory paragraph
relating to The Panda Project, Inc.'s ability to continue as a going
concern as described in Note B to the financial statements) as of
December 31, 1997 and for the nine-month period ended December 31,
1997 and for the year ended March 31, 1997 of PricewaterhouseCoopers
LLP. Such financial statements are incorporated herein by reference
in reliance upon such reports given upon the authority of such firm as
an expert in accounting and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in connection
with the sale and distribution of the securities being registered,
other than the underwriting discounts and commissions. All these
expenses will be paid by Panda.
Nature of Expense
-----------------
SEC registration fee . . . . . . . . . . .$ 86
Legal and accounting fees and expenses . .$ 13,400 *
Miscellaneous . . . . . . . . . . . . . .$ 514
---------
TOTAL $ 14,000 * Estimated
=========
Item 15. Indemnification of Directors and Officers. Florida
Business Corporation Act.
Section 607.0850(1) of the Florida Business Corporation Act (the
"FBCA") provides that a Florida corporation, such as the Registrant,
will have the power to indemnify any person who is or was a party to
any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against liability incurred in connection with such
proceeding, including any appeal thereof, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any
criminal action of proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 607.0850(2) of the FBCA provides that a Florida
corporation will have the power to indemnify any person who is or was
a party to any proceeding by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors,
the estimated expense of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification will be authorized if such person acted in good faith
and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification
will be made under Section 607.0850(2) in respect of any claim, issue
or matter as to which such person will have been adjudged to be liable
unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction,
will determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which
such court will deem proper.
Section 607.0850 of the FBCA further provides that, to the extent
that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any proceeding
referred to in subsection (1) or subsection (2), or in defense of any
claim, issue or matter therein, he will be indemnified against
expenses actually and reasonably incurred by him in connection
therewith; that indemnification provided pursuant to Section 607.0850
is not exclusive; and that the corporation may purchase and maintain
insurance on behalf of a director, officer, employee or agent of the
corporation against any liability asserted against him or incurred by
him in any such capacity or arising out of his status as such whether
or not the corporation would have the power to indemnify him against
such liabilities under Section 607.0850.
Notwithstanding the foregoing, Section 607.0850 of the FBCA
provides that indemnification of advancement of expenses will not be
made to or on behalf of any director, officer, employee or agent if a
judgment or other final adjudication establishes that his actions, or
omissions to act, were material to the cause of action so adjudicated
and constitute: (a) a violation of the criminal law, unless the
director, officer, employee or agent had reasonable cause to believe
his conduct was lawful or had no reasonable cause to believe his
conduct was unlawful; (b) a transaction from which the director,
officer, employee or agent derived an improper personal benefit; (c)
in the case of a director, a circumstance under which the liability
provisions regarding unlawful distributions are applicable; or (d)
willful misconduct or a conscious disregard for the best interests of
the corporation in a proceeding by or in the right of the corporation
to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
Section 607.0831 of the FBCA provides that a director of a
Florida corporation is not personally liable for monetary damages to
the corporation or any other person for any statement, vote, decision,
or failure to act, regarding corporate management or policy, by a
director, unless: (a) the director breached or failed to perform his
duties as a director, and (b) the director's breach of, or failure to
perform, those duties constitutes: (1) a violation of the criminal
law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was
unlawful; (2) a transaction from which the director derived an
improper personal benefit, either directly or indirectly; (3) a
circumstance under which the liability provisions regarding unlawful
distributions are applicable; (4) in a proceeding by or in the right
of someone other than the corporation or a shareholder, recklessness
or an act or omission which was committed in bad faith or with
malicious purpose or in a manner exhibiting wanton and willful
disregard of human rights, safety or property.
Articles of Incorporation of the Registrant
The Articles of Incorporation of the Registrant (the "Articles")
provide that, to the fullest extent permitted by applicable law, as
amended from time to time, the Registrant will indemnify any person
who is or was a party or is threatened to be made a party to an
action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person is or was a
director, officer, employee or agent of the Registrant or serves or
served any other enterprise at the request of the Registrant. This
indemnification includes the right to advancement of expenses when
allowed pursuant to applicable law.
In addition, the Articles provide that a director of the
Registrant will not be personally liable to the Registrant or its
shareholders for monetary damages for breach of the director's
fiduciary duty. However, the Articles do not eliminate or limit the
liability of a director for any of the following reasons: (i) a breach
of the director's duty of loyalty to the Registrant or its
shareholders; (ii) acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law; (iii) a violation
under Section 607.0834 of the FBCA (which imposes liability upon
directors for unlawful distributions); (iv) a transaction from which
the director derived an improper personal benefit; or (v) an act or
omission occurring before the effective date of the Articles.
Indemnification
The Registrant has entered into or intends to enter into
Indemnification Agreements with its directors (collectively, the
"Agreements") which provide that each director is entitled to
indemnification to the fullest extent permitted by applicable law.
Such indemnification will cover all expenses, liabilities, judgments
(including punitive and exemplary damages), penalties, fines
(including excise taxes relating to employee benefit plans and civil
penalties) and amounts paid in settlement which are incurred or
imposed upon the director if the director is a party or threatened to
be made a party to any threatened, pending or completed action, suit
or proceeding of any kind, whether civil, criminal, administrative or
investigative (including actions by or in the right of the Registrant
and any preliminary inquiry or claim by any person or authority), by
reason of the fact that the director is or was a director, officer,
employee or agent of the Registrant or is or was serving at the
Registrant's request as a director, officer, employee or agent of
another corporation (including a subsidiary), partnership, joint
venture, trust or other enterprise against liability incurred in
connection with such proceeding, including any appeal thereof
(collectively, the "Covered Matters"). Pursuant to the Agreements,
the directors are presumed to be entitled to indemnification
irrespective of whether the Covered Matter involves allegations of
intentional misconduct, alleged violations of Section 16(b) of the
Exchange Act, alleged violations of Section 10(b) of the Exchange Act
(including Rule 10b-5 thereunder), breach of the director's fiduciary
duties (including duties of loyalty or care) or any other claim.
In addition to the foregoing, Panda maintains a director and
officer liability insurance policy insuring directors and officers of
the Registrant against certain liabilities.
Item 16. Exhibits.
Exhibit Description of Exhibit
- ------- ----------------------
3.1 Amended and Restated Articles of Incorporation of Panda,
as amended *
3.2 Amended and Restated By-Laws of Panda *
4.1 Specimen Certificate of Common Stock of Panda (filed as
Exhibit 4.1 to Panda's Registration Statement on Form
SB-2 (File No. 33-6694-A)) *
5.1 Opinion of Morgan, Lewis & Bockius LLP
23.1 Consent of Morgan, Lewis & Bockius LLP (included in
Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Grant Thornton LLP
- -----------------
* Incorporated herein by reference.
Item 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in
this Registration Statement; provided, however, that paragraphs (1)(i)
and (1)(ii) do not apply if the information required to be included in
a post- effective amendment by those paragraphs is contained in
periodic reports filed by Panda pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in this
Registration Statement.
(2) That, for the purposes of determining any liability under
the Securities Act, each post-effective amendment will be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at the time will be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration Statement
will be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the
time will be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by Panda pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act will be
deemed to be part of this Registration Statement as of the time it was
declared effective; and
(2) For purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus will be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-2
and has duly caused this Registration Statement on Form S-2 to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Boca Raton, State of Florida, on this 16th day of July,
1999.
THE PANDA PROJECT, INC.
By: /s/ Stanford W. Crane, Jr.
-----------------------------
Stanford W. Crane, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-2 has been signed by
the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Stanford W. Crane, Jr. Chief Executive Officer,
President July 16, 1999
Stanford W. Crane, Jr. and Director (Principal
Executive Officer)
/s/ Melissa F. Crane Acting Chief Financial
Officer July 16, 1999
Melissa F. Crane (Principal Financial and
Accounting Officer)
/s/ William Ahearn Director July 16, 1999
William Ahearn
EXHIBIT INDEX
-------------
Exhibit Description of Exhibit
5.1 -- Opinion of Morgan, Lewis & Bockius LLP
23.1 -- Consent of Morgan, Lewis & Bockius LLP (included
in Exhibit 5.1)
23.2 - Consent of Grant Thornton LLP
23.3 -- Consent of PricewaterhouseCoopers LLP
Exhibit 5.1
July 14, 1999
The Panda Project, Inc.
951 Broken Sound Parkway, N.W., Suite 200
Boca Raton, Florida 33487
Re: Public Offering of Common Stock
Pursuant to Registration Statement on Form S-2
Ladies and Gentlemen:
We have acted as counsel to The Panda Project, Inc., a Florida
corporation (the "Company"), in connection with a registration on Form
S-2 (the "Registration Statement") to be filed with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Act"), relating to the sale of up to 2,100,000 shares of
common stock of Panda, par value $.01 per share ("Common Stock"), all
of which will be sold from time to time by the Selling Securityholder
named in the Registration Statement on the over-the-counter market and
directly through broker-dealers.
We have examined the Registration Statement and such corporate
records, documents, statutes and decisions as we have deemed relevant
in rendering this opinion.
Based on the foregoing, it is our opinion that the Common Stock was
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is
required under Section 7 of the Act or the rules or regulations of the
SEC thereunder.
Very truly yours,
Exhibit 23.2
Consent of Independent Certified Public Accountants
We have issued our reports dated March 18, 1999, accompanying the
consolidated financial statements and schedule included in the Annual
Report of The Panda Project, Inc. on Form 10-K for the year ended
December 31, 1998. We hereby consent to the incorporation by
reference of said reports in the Registration Statement of The Panda
Project, Inc. on Form S-2, and to the use of our name as it appears
under the caption Experts .
Grant Thornton LLP
Weston, Florida
July 14, 1999
Exhibit 23.3
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-2 our report dated March 10, 1998
which relates to the financial statements of The Panda Project, Inc.
as of December 31, 1997 and for the nine-month period ended December
31, 1997 and for the year ended March 31, 1997, appearing on page F-3
of The Panda Project, Inc. s Annual Report on Form 10-K/A for the year
ended December 31, 1998. We also consent to the reference to us under
the heading Experts in such Registration Statement.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
July 14, 1999
